FILE
PHOTO: A general view of the Amuay refinery complex which belongs to
the Venezuelan state oil company PDVSA in Punto Fijo, Venezuela November
17, 2016. REUTERS/Carlos Garcia Rawlins/File Photo
HOUSTON (Reuters) - Venezuela is considering producing fuels from
foreign crude oil for the first time, according to planning documents
seen by Reuters, as the country struggles to meet its obligations
despite having the world’s largest crude reserves.
State-run
oil company PDVSA may process up to 57,000 barrels per day (bpd) of
foreign crude in June at the country’s largest refinery, according to a
monthly refining plan which was viewed by Reuters on Wednesday. The
output would help fulfill fuel contracts for Russian, Chinese and other
customers and reduce purchases of fuels for domestic use, the documents
showed.
PDVSA did not respond to a request for comment.
PDVSA
has been falling short on fuel exports in recent years due to a lack of
lighter crudes to refine, a shortage of spare parts, poor maintenance,
and management upheaval at its domestic refining network. PDVSA also
lost access in May to inventories produced in Curacao, where it operates
the Isla refinery.
Declining revenue resulting from falling oil
production and exports have driven Venezuela into a severe economic
recession, and led to a loss of skilled workers, and widespread food and
medicine shortages. Some energy experts say further production declines
could contribute to a global crude shortfall.
U.S.-based ConocoPhillips (COP.N)
last month seized some of PDVSA’s assets in the Caribbean seeking
payment for a $2 billion arbitration award, reducing PDVSA’s ability to
deliver fuel and crude exports to Asian customers and regional allies.
Venezuela,
an OPEC member country, has never before imported foreign crude oil for
its domestic refineries, although it has blended African, Russian and
U.S. crudes with its extra heavy oil to make exportable products. It
also has purchased foreign oil for Caribbean refineries and to supply
allies, including Cuba.
DECADES-LOW OUTPUT
In
May, the country produced 1.53 million bpd of crude, according to
numbers delivered to OPEC, but other sources put the figure at 1.39
million bpd, which would be the lowest monthly output since the 1950s.
If
PDVSA chooses to refine the imported crude, one of two scenarios
outlined in documents showing its production, supply and contract
requirements, the imports would alleviate a lack of domestic lighter
crudes needed at the refineries, which have been running at about a
third of their capacity. It could use Russian, Iranian or Angolan
crudes, according to the documents.
“The larger processing
of crude would increase our fuel availability. It would also decrease
the requirements (to import) of vacuum gasoil and diesel,” said one of
the documents prepared in May.
The alternative, not using
imported crude, would mean the shortfall in fulfilling contracts to
supply fuel would increase, the document showed. Most of these fuel
contracts cover oil-for-loans with Chinese and Russian companies.
As
of June 13, two tankers holding Russian Urals crude were waiting in
Venezuelan waters to discharge, according to Thomson Reuters vessel
tracking data. One of the two, the Advantage Atom, is waiting near its
Amuay refinery.
Venezuela
in January started routine imports of Urals crude to supply Cuban
refineries, spending nearly $440 million on the purchases for its
Caribbean ally.
The Urals cargoes had been discharged in Curacao
for transfer to Cuba, but since Conoco began seizing PDVSA’s Caribbean
assets, tankers arriving from Russia have been diverted to Venezuela’s
Paraguana Refining Center (CRP), which includes its Amuay and Cardon
refineries.
NOT ENOUGH FOR ALL
To meet its domestic
demands and PDVSA’s fuel supply contracts, Venezuela would have to
produce some 850,000 bpd of fuels, the documents show.
Neither
of the June alternatives show it getting close to that level. If PDVSA
decides to process the foreign crude, it would produce 606,000 bpd, and
less if it does not.
From
January through March, PDVSA’s refineries supplied 78 percent of the
365,000 bpd of the fuels demanded by Venezuela’s domestic market, which
forced the company to import finished products including gasoline and
diesel.
Under the plan excluding foreign oil imports, PDVSA’s
domestic refineries this month would work at about 36 percent of their
total capacity, or 473,000 bpd of Venezuelan crude, according to the
documents, reflecting an acute lack of spare parts and delayed
maintenance projects.
On Wednesday, PDVSA’s 310,000-bpd Cardon
refinery restarted a vacuum distillation unit that was waiting for spare
parts to be repaired. Last week, the 645,000-Amuay refinery restarted
one of its crude distillation units.
Those repairs are just some
of the many still pending, according to the documents. At Venezuela’s
smallest refineries, Puerto la Cruz and El Palito, the lack of medium
and light crudes has kept several distillation units out of service for
months.
The insufficient fuel production is affecting China’s
CNPC [CNPC.UL] and its subsidiaries the most as PDVSA would have to ship
258,000 bpd of fuel oil and jet fuel to these companies for repaying
Chinese loans extended to the Venezuelan government in the last decade,
but it typically delivers less than 100,000 bpd.
Russia’s Rosneft (ROSN.MM)
this month is entitled to 80,000 bpd of fuel oil, jet fuel and natural
gasoline under oil-for-loan contracts, while Cuba and members of
Petrocaribe should receive at least 108,000 bpd, according to current
contracts.
Reporting by Marianna Parraga, editing by Diane Craft
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